SUPPLEMENTARY AGENDA
Council Briefing
12 May 2020
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Time: |
6pm |
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Location: |
E-Meeting, Access Available on the City's website http://webcast.vincent.wa.gov.au/ |
David MacLennan
Chief Executive Officer
7 Community & Business Services
7.6 May Budget Review 2019/2020 (COVID-19) [ABSOLUTE MAJORITY DECISION REQUIRED]
7 Community & Business Services
Attachments: 1. Statement
of Comprehensive Income by Nature & Type ⇩ 
2. Statement of
Comprehensive Income by Program ⇩
3. Rate Setting
Statement by Program ⇩ 
4. Capital
Expenditure Budget Report ⇩
5. Cash Backed
Reserves ⇩
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That Council ADOPTS BY AN ABSOLUTE MAJORITY the May budget review for the 2019/20 financial year as detailed in this report and Attachments 1 – 4, in accordance with Regulation 33A of the Local Government (Financial Management) Regulations 1996. |
Purpose of Report:
To consider and adopt the proposed budget amendments as a result of the impacts of COVID-19.
Background:
The mid-year budget review was adopted by Council on 17th March 2020.
The social distancing impact due to COVID-19 and the subsequent measures that have been imposed by State and Federal Government to contain the virus has resulted in significant financial implications to the City. Accordingly, Administration has reviewed and adjusted the 2019/20 budget to accommodate for the changes to ensure the budget is in line with current market & economic trends.
Details:
A detailed review has been undertaken to the current budget to decrease operating and capital expenditure where possible and potentially defer some capital expenditure to future years to compensate for the significant decrease in revenue for the last quarter of the year.
The detail of the draft budget review is included in the following documents:
· Statement of Comprehensive Income by Nature & type (Attachment 1);
· Statement of Comprehensive Income by Program (Attachment 2);
· Rate Setting Statement by Program (Attachment 3);
· Capital Expenditure Report (Attachment 4); and
· Cash Back Reserves (Attachment 5).
Operating Budget
The net result from operations, as detailed in Attachment 1 is a deficit of $3,880,156 equating to an increase of $949,189 compared to the mid-year budgeted deficit of $2,930,967. The table below outlines some of the major movements in this review cycle:
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Mid-year Budget 2019/20 |
Proposed Revised Budget 2019/20 |
Budget Increase/ (Decrease)
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Comments
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REVENUE |
$ |
$ |
$ |
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Fees and charges |
19,562,776 |
15,769,274 |
(3,793,502) |
Revenue generated from ‘Fees and charges’ has decreased significantly due to the closure of various City facilities. The following areas materially contributed to this reduction
· Beatty Park - $1,929,897; and · Parking facilities - $1,644,792.
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Interest earnings |
981,788 |
748,100 |
(233,688) |
Reduction in interest earnings due to low interest rates offered by financial institutions for term deposits ($200K) and the reduction in penalty interest ($35K) in accordance to the COVID-19 relief and recovery strategy.
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|
Other revenue |
1,350,258 |
1,249,394 |
(108,864) |
The City has decided to waive lease income for Category 1 & 2 tenants for 6 months and Category 3 tenants on a case-by-case rent scenario.
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The City has made rigorous changes to the operating expenditure budgets to compensate for this decrease in revenue. Below are some of the areas that have experienced significant cuts in budget amounts:
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|
Mid-year Budget 2019/20 |
Proposed Revised Budget 2019/20 |
Budget Increase/ (Decrease)
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Comments
|
|
EXPENSES |
$ |
$ |
$ |
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|
Materials and contracts |
19,030,804 |
17,038,438 |
(1,992,366) |
The delivery of services have been disrupted due to COVID-19 measures in place, hence budgets for the following areas have been reduced: -
· Legal costs - $150,000 · Tipping costs - $356,268 · Events and advertising - $309,489 · Bulk verge collections - $228,375 · Maintenance works - $273,344 · Operating initiatives - $365,920 · Other services - $308,970
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Employee Costs |
25,904,065 |
24,915,201 |
(988,864) |
Casual employment has decreased significantly due to the closure of Beatty Park and library representing a reduction in employment budget of approximately $750,000.
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Other expenditure |
3,728,173 |
3,477,834 |
(250,879) |
The delivery of services have been disrupted resulting in a budget reduction of approximately $450,000.
However, this is offset by an increase of $180,000 for bad debt provisions in anticipation of the current economic environment. |
Rate Setting Statement Position
As shown in the Rate Setting Statement by Program (Attachment 3), the overall impact of all proposed budget amendments is a projected budget deficit of $6,604.
Capital Expenditure Budget Amendments (Attachment 4)
The revised capital expenditure budget is projected to be $11,138,025 representing a reduction of $2,079,816 compared to the March mid-year budget review amount of $13,217,841. This reduction is represented by the following items:-
1. Carry forwards – reduction of $ 1,209,173 due to projects being deferred to subsequent years. The following is a breakdown of projects that have been carry forward and their deferred is noted below:
2. Retained projects - these are projects that are not proceeding or have been completed with some element of savings. The total of these projects was $ 1,395,715 and listing of these projects can be found in the table below:
3. New project – an increase of $525,600 as a result of commissioning additional monies for the Art relief project.
4. Other budget amendments included the following items
a. Transfer of IT costs to OPEX – $83,119;
b. Transfer of projects savings to the Leederville Oval reserve – $57,261; and
c. Increase in budget required for some project – $139,852.
Full details of capital budget amendments are listed at Attachment 4.
Cash Backed Reserves Transfers
The total reserves for 2019/20 including the budget amendments are included in Attachment 5. The revised ‘Transfers from reserves’ is proposed to increase by $25,600. The breakdown is as follows: -
1. Percentage for Art reserve – purpose of this reserve has changed. The current allocation of $200,000 for the Public Art project and an additional amount of $325,600 has been commissioned as monies to assist with the ‘Art relief’ project.
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2. Cash in Lieu Parking Reserve – construction of Carr Street element of protected bike lane project not proceeding and Florence Street bike network enhancement proceeding next financial year. Associated funding of $300,000 is not required this FY.
‘Transfers to Reserves’ is proposed to increase by $1,174,593 and is materially contributed by the transfer of an additional $1,200,000 to the Asset sustainability reserve. This transfer relates to projects that have been earmarked to be carried forward to subsequent financial years.
This is offset by a decrease of $78,315 relating to expected interest repayments from investments.
Consultation/Advertising:
Not applicable.
Legal/Policy:
This is not a mandatory budget review, but due to the financial implications of COVID-19, it is considered as prudent and good governance practise to perform this additional budget review. The review is in accordance with the functions of the CEO as set out in section 5.41 of the Act:
5.41(d) “manage the day to day operations of the local government.”
Risk Management Implications:
Low: Conducting this budget review ensures the City’s financial situation and budgeting is updated to reflect the current economic climate.
Strategic Implications:
- This budget review is keeping in line with the City’s Strategic Community Plan 2018-2028:
Innovative and Accountable
Our resources and assets are planned and managed in an efficient and sustainable manner
Our community is aware of what we are doing and how we are meeting our goals
We are open and accountable to an engaged community
SUSTAINABILITY IMPLICATIONS:
Not applicable.
Financial/Budget Implications:
The overall impact of the proposed budget amendments results in a deficit of $6,604.
